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She said that it was apparent to her within the first

twenty-four hours while reviewing Hamilton Taft financial records
that Hamilton Taft was in a cash flow crisis. She said it was
then her job to look at investments and/or loans to determine the
likelihood of these assets generating any income~ She was to
insure that any future capital outflow was ureal investments".

She found out that almost immediately after Maxpharma

purchased Hamilton Taft from cigna corporation that Hamilton Taft
client funds were wire transferred out of Hamilton Taft. These
funds were in the form of notes and were booked at Hamilton Taft
as investments. But she saw no evidence of an attempt to collect
on these notes by Hamilton Taft. She said that some of the
transactions were incredibly complicated.

She said that she had frequent meetings concerning

these notes with Hamilton Taft officers. She discovered that
I I (PHD), Chief Financial Officer,l I
PHO), Director of Operations, I 1President
~~~--~~~~(PHO), Comptroller, were the only Hamilton Taft
off~cers a knew about the loans by Hamilton Taft which Were
outstanding and uncollected.

She further explained that she recalls ten to fourteen

million dollars in loans had left Hamilton Taft with no payments
returning to Hamilton Taft. She discussed these loans with
I Ibut not with I ,
All of these loans were
"brokered ll through the Maxpharma office in Dallas, Texas.
discovered that Maxpharma officers would telephoner
Hamilton Taft and instruct her to wire money to Ma~pharman
She
at 1
Dallas a9 d then a,~er the fact.Maxpharma would then send the
b7C notes toL Jln San FranC1SCO.

She felt that the officers at Hamilton Taft were

protective of~ I
oftenl IWQul~ accuse
I IOf raiding the funds of Hamilton Taft.1 )was not
very helpful in her audit. She felt that this was because he was
the person who actually wire transferred the funds from Hamilton
alIas. She understood the process being that (FNU)
of Maxpharma in Dallas would
o transfer un s an
r---. . . . . .~o=-~wire the monies. I
c:::
Iwould then instruct
~(PHO), a director, often
got irate at her inquiries regarding Hamilton Taft loans. A day
or two after she started working at Hamilton Taft she discovered
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a "funny" transaction where two to three million dollars of

Hamilton Taft funds was wired to Dallas, Texas. She understood
thatl ~were working on some deal to raise funds.
She was told that these funds were supposedly to be used to
"recapi talize" Hamilton Taft. I linstructed her that the
details of the transaction was none of her business l but she
believes that the funds went to either Amerimac Company in
California or to Gulftex, a real estate business in Texas.
I ~said that from her examination of Hamilton
Taft financ1ai records she discovered that all the funds sent out
J7C for these loans had to be dedicated Hamilton Taft client funds.
She said that' lhad to know that
Hamilton Taft client funds were being used to finance these
investments. She understood thatl lactually assisted in
the creation of the notes to Hamilton Taft. One of these loans
in 1988 in the amount of approximately $200,000.00 was to a
CONNIE CHIP ARMSTRONG, JR. business in Dallas, Texas by the name
of Dresdner Corporation (PHD).
She said thatl 1 (PHO) I Sales Manager, and
1~------------l(PHO), Vice Presldent of dperations, at Hamilton
Taft were both concerned and upset at the news of the loans.
These loans violated Hamilton Taft's written cash management
policy which stated that Hamilton Taft can onJY invest client
funds in safe overnight type of investments. I I said that
she recalls that most of the notes for the 1988 loans were for a
90 or 180 day period. She stated that in or around March 1989
I Iwas fired byl I resigned.
She said that Arthur Anderson C.P.A. firm withdrew from
the Hamilton Taft audit a couple of days after they gave Hamilton
Taft their appointment letter. At that point she said that
management at Hamilton Taft felt that Hamilton Taft did not have
enough interest money to pay Arthur Anderson. Therefore,
Hamilton Taft did not receive any audited financial statements to
give the increasingly concerned Hamilton Taft clients. EDS one
of Hamilton Taft's largest clients was requesting audited
financial statements.
I 'said that she started taking legal action on
the debtors at the
notes to Hamilton Taft. She was taking
aggressive collection acti~she felt that she could have
collected on the Amerimac'L----Jandl rates if not for
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the ARMSTRONG takeover of Hamilton Taft in March of 1989. She

said that the I ~ and Amerimac notes totaled approximately $6
million dollars. She personally told ARMSTRONG at the Petit and
Martin law offices about the notes outstanding and her collection
efforts at Hamilton Taft. She told him that he should be able to
collect on some of these loans. She said that he did not seem
interested.

She said that in March of 19891 I concluded that

he was not able to recapitalize Hamilton Taft and that Hamilton
Taft would have to file for Chapter Seven bankruptcy protection
b7C so he conceded Hamilton Taft to ARMSTRONG 4She recalls a $20
million dollar figure being used at Hamilton Taft around the time
ARMSTRONG took control of Hamilton Taft. She said that the $20
million dollars represented the negative capital and the negative
cash flow at Hamilton Taft. She said that she felt at that time
that this much capital would be necessary to keep Hamilton Taft a
viable company. The financial condition of Hamilton Taft was
constantly being communicated to ARMSTRONG and his attorneys
during the legal actions. I 'said that she sat through
all of the depositions during ARMSTRONG's legal action to gain
control of Hamilton Taft.

She said that she understood that ARMSTRONG's plan for

Hamilton Taft was to recapitalize Hamilton Taft by investing $20
million dollars, rehirel Ito satisfy Wells Fargo Bank and
expand Hamilton Taft's customer base to infuse more revenue into
Hamilton Taft.